NEW ZEALAND GAZETTE

4 MARCH

Table 4: Intra-zone disallowances

(4) Calculate the amount of the inter-zone disallowances as follows:

(a) inter-zone disallowances are derived in the following order: time zones 1 and 2, 2 and 3, and 1 and 3. The inter-zone disallowance factors which must be used to derive the inter-zone disallowance amounts are specified in Table 5;

Table 5: Inter-zone disallowances

(b) derive the residual position in each time zone (which is the net amount of the aggregate risk weighted long position and the aggregate risk weighted short position). If the residual position is positive this is a residual long position and if it is negative this is a residual short position;

(c) there is a matched position between time zones 1 and 2 if there is a residual long position in one time zone and a residual short position in the other. The matched position is either the smaller of the absolute value of the residual long position and the absolute value of the residual short position, or, if the absolute values of those positions are equal, that absolute value. If there is no matched position, the amount of horizontal disallowance is zero. If there is a matched position, then the amount of horizontal disallowance between time zones 1 and 2 is the value of the matched position multiplied by the disallowance factor for time zones 1 and 2 specified in Table 5;

(d) derive the net residual position in time zone 2, by taking the difference between the absolute value of the residual position in time zone 2 and the matched position between time zones 1 and 2, and allocating to that amount, if any, the sign of the residual position in time zone 2. If the net residual position in time zone 2 is positive this is a net residual long position and if it is negative this is a net residual short position;

(e) there is a matched position between time zones 2 and 3 if there is a net residual long position in time zone 2 and a residual short position in time zone 3 or a net residual short position in time zone 2 and a residual long position in time zone 3. The matched position is either the smaller of the absolute value of those residual positions, or, if the absolute values of those positions are equal, that absolute value. If there is no matched position, the amount of the horizontal disallowance is zero. If there is a matched position then the amount of horizontal disallowance between time zones 2 and 3 is the value of the matched position multiplied by the disallowance factor for time zones 2 and 3 specified in Table 5;

(f) derive the net residual position in time zone 1 and in time zone 3:

(i) in time zone 1, by taking the difference between the absolute value of the residual position in time zone 1 and the matched position between time zones 1 and 2, and allocating to that amount, if any, the sign of the residual position in time zone 1;

(ii) in time zone 3, by taking the difference between the absolute value of the residual position in time zone 3 and the matched position between time zones 2 and 3, and allocating to that amount, if any, the sign of the residual position in time zone 3,

(if the net residual position in a time zone is positive this is a net residual long position and if it is negative this is a net residual short position);

(g) there is a matched position between time zones 1 and 3 if there is a net residual long position in one time zone and a net residual short position in the other. The matched position is either the smaller of the absolute value of the net residual long position and the absolute value of the net residual short position, or, if the absolute values of those positions are equal, that absolute value. If there is no matched position, the amount of horizontal disallowance is zero. If there is a matched position then the amount of horizontal disallowance between time zones 1 and 3 is the value of the matched position multiplied by the disallowance factor for time zones 1 and 3 specified in Table 5.

(5) The amount of the horizontal disallowance in a single currency is the aggregate of the amounts of intra-zone disallowances and inter-zone disallowances in that currency.

(6) The horizontal disallowance in a currency shall have the same sign (positive or negative) as the directional risk calculated for that currency.

7. Aggregate Interest Rate Exposure For All Currencies

A Banking Group’s Aggregate Interest Rate Exposure is the greater of the absolute value of the sum of any positive Interest Rate Exposures and the absolute value of the sum of any negative Interest Rate Exposures.

Aggregate Foreign Currency Exposure

8. The Registered Bank shall derive the amount of Aggregate Foreign Currency Exposure in accordance with either:

(a) clauses 9 and 10 of this Schedule; or

(b) any other method, but only if the Aggregate Foreign Currency Exposure derived in accordance with that method is not, in the opinion of the Registered Bank (such opinion to be based on reasonable grounds), Materially lower than the amount derived pursuant to clause 8(a) of this Schedule.

9. Foreign Currency Exposure in a Single Foreign Currency

(1) Subject to clauses 9(2) and 9(4) of this Schedule, a Banking Group’s Foreign Currency Exposure in a single foreign currency is derived by:

(a) subtracting the aggregate amount of the value of Financial Liabilities (whether recognised or unrecognised) of the Banking Group in that foreign currency from the aggregate amount of the value of the Financial Assets (whether recognised or unrecognised) of the Banking Group in that foreign currency; and

(b) multiplying the amount derived in clause 9(a) of this Schedule by 0.08.

(2) Subject to clause 9(3), the value of a Financial Instrument is either:

(a)(i) in the case of an unrecognised Financial Instrument and a recognised Financial Instrument which is a market related contract, the face or contract amount of the Financial Instrument expressed in New Zealand dollars using the relevant spot exchange rate; and

(ii) in the case of other Financial Instruments, the carrying amount of the Financial Instrument expressed;